Regulatory Activity in a Holiday-Shortened Week: A Deep Dive
In the world of regulatory affairs, holiday-shortened weeks often lead to a lull in activity, and this past week was no exception. With only five rulemakings that had measurable economic impacts, the volume of regulatory activity was limited. However, the implications of these actions were significant, particularly in the realm of cybersecurity, where new standards for government contractors are expected to incur costs in the tens of billions of dollars. Overall, agencies reported a staggering $42.4 billion in total costs and added 5.8 million hours of annual paperwork burden.
Notable Regulatory Actions
The most consequential rulemaking of the week came from the Department of Defense (DOD) with the final rule on the Cybersecurity Maturity Model Certification (CMMC) Program. This rule is pivotal as it establishes mechanisms for the DOD to verify that defense contractors and subcontractors have implemented the necessary security requirements for their designated CMMC levels. This verification process is crucial for maintaining compliance throughout the contract period.
This rule builds upon an interim final rule established during the Trump Administration, which had already set a high bar with a cost estimate of nearly $93 billion. Despite its deregulatory agenda, the Trump Administration ended its term with a net regulatory cost of approximately $40 billion, largely due to this rule. The current CMMC rule, however, has revised cost estimates upwards, reflecting feedback from public comments that indicated initial estimates were too low. The new rule adds an additional $42.3 billion in costs and nearly 5.8 million hours of new paperwork requirements, underscoring the substantial economic impact of cybersecurity regulations.
Tracking the Administrations
As we analyze the regulatory landscape, it becomes evident that the Biden Administration is charting a distinct course compared to its predecessors. While there is an expectation that the current administration will seek to restore many of the regulatory actions from the Obama era, it is also clear that it will pursue its own initiatives. The American Action Forum (AAF) has been tracking these developments since 2005, allowing for a comparative analysis of the regulatory records of the three most recent administrations.
The CMMC rule has significantly influenced the Biden Administration’s regulatory totals, pushing its cumulative final rule cost total to over $1.7 trillion. For context, this figure is not quite equivalent to the gross domestic product of South Korea but surpasses the omnibus package passed at the end of 2022. The regulatory activity this week was notable for all three administrations, with a deregulatory action from the Environmental Protection Agency (EPA) under Trump pushing its cost total back into net-savings territory. Meanwhile, the Obama Administration saw a significant increase in its regulatory costs due to the 2012 greenhouse gas emissions standards.
Total Burdens
Since the beginning of the year, the federal government has published a staggering $1.41 trillion in total net costs, with $1.29 trillion stemming from finalized rules. Additionally, there has been an increase of 123.7 million hours in net annual paperwork burdens, with 57.7 million hours attributed to final rules. These figures highlight the ongoing trend of increasing regulatory burdens on businesses and government contractors alike.
Conclusion
In summary, while the holiday-shortened week may have produced a limited volume of regulatory activity, the implications of the actions taken were far-reaching. The new cybersecurity standards for government contractors are set to impose significant costs and paperwork burdens, reflecting the growing importance of cybersecurity in federal contracting. As we continue to track the regulatory landscape, it is clear that the Biden Administration is making its mark, with a focus on cybersecurity and compliance that will shape the future of government contracting and regulatory policy. The ongoing analysis of regulatory trends will be essential for understanding the broader economic impacts and the evolving relationship between government and industry.